Key message: With Mutlu sold and Hesto due to be consolidated the group becomes much simpler to evaluate.
- Metair released FY24 results. The year was characterised by significant progress in the business restructuring – cost reduction, optimising manufacturing and production efficiencies, rationalising unprofitable business lines and adjusting commercial strategies. Mutlu has been sold and Hesto will be consolidated from April 2025. Metair will become a significantly simpler company to analyse post all of these steps and the valuation should start to reflect the underlying value of the businesses.
- Revenue and EBITDA declined by 2% and 8% respectively, with EBITDA impacted by R41m of restructuring costs. EBIT before capital items declined 20%. HEPS from continuing operations declined by 9% to 89c. If Hesto was included in the group results pro forma HEPS would have been 140c.
- Automotive Components: OEM production declined by 5%, with Toyota falling 28% due to the engine emissions issue. Subsidiaries Hesto, Smiths, Lumotech, Automould and Supreme Spring were impacted by this issue. This has now been resolved and we expect 15% growth for this division in FY25 due to the Toyota recovery. The operating margin at 5.1% held up well and this should improve to 6-7% from FY25. Hesto contributed EBIT of R257m (from a loss of R608m) at a margin of 4.7% (target 6-7%).
- Aftermarket Automotive Parts & Services: EBIT increased by 28% on an enhanced customer focus. First Battery recovered well despite a decline in battery sales to 1.6m (from 1.7m), boosted by an improved sales mix, manufacturing efficiencies and scrap recovery, and the operating margin improved to 10.6% (from 8.5%). Rombat increased battery sales by 28% with gains in the export market and the margin increased to 1.8% (from 1.6%). The division had restructuring costs or R32m. AutoZone will be consolidated from 31 December 2024. Autozone should generate approx. R2.4bn in revenue at a 5-6% margin.
- Discontinued operations: The sale of Mutlu was concluded on 19 December 2024.
- A successful debt restructuring has simplified the debt structure and pushed maturities out to match cash flows. Metair has to meet EBITDA targets as a debt covenant and delivery of EBITDA and free cashflow remains key. Diversification from OEM exposure should grow after the AutoZone acquisition and planned aftermarket parts growth into Africa.
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